Investment Opportunity in the Brazilian Natural Gas Transportation Sector

Transcription

1 Investment Opportunity in the Brazilian Natural Gas Transportation Sector SEPTEMBER 2017

2 Executive summary Petróleo Brasileiro S.A. PETROBRAS ( PETROBRAS or Seller ), with the assistance of Banco Santander (Brasil) S.A. ( Santander ) as its exclusive financial advisor in the process, is pursuing to sell a 90% equity stake in Transportadora Associada de Gás S.A. ( TAG ) Summary of the Opportunity PETROBRAS is pursuing to sell a 90% equity stake in TAG, a fully owned subsidiary of PETROBRAS (the Potential Transaction or Opportunity ). Geographic location of the assets TAG is a company with proven track record that holds long-term authorizations of natural gas pipelines that total circa 4.5 thousand km located in the Northeast and North of Brazil, fully contracted with PETROBRAS through long term ship-or-pay agreements. Most of O&M and other operational activities are executed by Petrobras Transporte S.A. - TRANSPETRO (a PETROBRAS subsidiary). The assets are regulated by the Brazilian oil and gas regulatory agency, ANP 1. The Process Legend: TAG NTS TBG 2 TSB 3 Gás Ocidente TAG has the largest gas pipeline network of the country with c. 4.5 thousand km PETROBRAS is inviting selected companies, in compliance with requirements stablished in this Opportunity overview ( Teaser ), to participate in the Process. Invited companies and other prospective purchasers that meet the requirements set in this Teaser must express its interest until September, 13 th, In order to have access to relevant (and confidential) technical, legal and financial information, including the Instruction Letter, Confidential Information Memorandum and relevant information related to the Process, the potential investor is required to sign a Confidentiality Agreement and the Compliance Certificate until September, 22 nd, PETROBRAS reserves itself the right to amend the Process as it may judge appropriate, provided that any change is equally informed to all participants. Prospective purchaser may hire financial, technical and legal advisor to assist in the process, under its responsibility and incurring in its costs, provided that such advisors are institutions with unblemished reputation, experience in the business and does not have any conflict of interest with PETROBRAS, whereas the existence of any eventual conflict will be ascertained in compliance with criteria established by PETROBRAS. PETROBRAS may, during the Process, perform preventive risk analysis, in compliance with Anti-Bribery Law and the Petrobras Program for Preventing Corruption - PPPC, and may ask any participant to fill out a detailed questionnaire to verify the compliance of its practices and conducts with the Anti- Bribery Law. Contact Information Under no circumstances should the Seller nor any director, officer, or employee of PETROBRAS or TAG, or any affiliates of such companies be contacted regarding the Process. All communications should be directed to Santander, which is acting as exclusive financial advisor to PETROBRAS in the Process, to the following address pbr-noronha@santander.com.br. (1): Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (Brazil s Oil & Gas regulatory Agency) (2): Transportadora Brasileira Gasoduto Bolívia-Brasil S/A (3): Transportadora Sulbrasileira de Gás S/A Source: PETROBRAS 2

3 Brief Overview of TAG TAG operates 4,422 km of gas pipelines with 5 transportation agreements and a total contracted capacity 74.7 mln cbm/day Highlights of Pipelines As of December, 2016 GTA 1 COD GTA 1 (signing date) GTA 1 Maturity Length (km) Authorization Expiration Date Contracted Volume (mln m³ / day) Gasene 2 Nov-08 Nov-08 Nov-33 1,401 Mar Malha NE Jan-06 Jul-03 Dec-25 2,002 Mar Pilar Ipojuca Dec-11 Dec-11 Nov Nov Urucu-Manaus Dec-10 Dec-10 Nov Nov GAL Jul-12 Apr-12 Mar n.m. 1.5 TAG 4, Lagoa Parda Vitória n.a. n.a. To be signed 81 n.m. 1.1 TAG pro-forma 4, Northeast network Northern network Evolution of Contracted Volume by Current and New GTAs 3,4 As of December, % 98% 30% 39% 70% 61% 59% 41% 100% Current GTAs New GTAs After current gas transportation contracts maturity, the same capacity will be recontracted through a public hiring process (1): GTA: Gas Transportation Agreement (2): Gasene GTA is comprised of two interconnected gas pipelines with different contracted capacities (mln m³/day): Gasene Norte (10.3) and Gasene Sul (20.0). Approximately 50% of the tariff is linked to U$ (3): Assuming Lagoa Parda Vitória GTA maturity as of December, 2033 (4): New GTAs will be signed under public hiring process Source: PETROBRAS 3

4 Brief Overview of TAG (Cont d) Low risk and solid financial performance backed by robust contractual framework and high EBITDA margins Current Contractual Framework Shipper ANP (regulatory agency) Third-party suppliers compression Services Environmental protection agencies O&M contracts Other government agencies G&A E&S 1 agreements Financial Highlights Pro-forma net revenues BRL Billion 4,4 4,7 Pro-forma EBITDA and EBITDA margin BRL Billion, % of net revenues 87.2% 87.6% 3,9 4, USD Billion USD Billion (1): Expenses and Sharing agreements (2): Considering PTAX exchange rate USD/BRL of 3.41 (2015 average) and USD/BRL of 3.52 (2016 average), disclosed by Brazilian Central Bank Source: Brazilian Central Bank and TAG. Pro forma financial statements 4

5 Investment Highlights Sizeable premium infrastructure assets with stable and predictable cash flow with robust and low regulatory risks Key Highlights Unique asset base Shares the same business profile of NTS which attracted large and sophisticated global strategic and financial investors. Vast gas pipeline network of circa 4.5 thousand km. Solid operational track-record with high availability and reliability. Geographically diversified, located in growing demand regions in the North and Northeast of Brazil, which have been growing at faster pace when compared to other regions in the country. No other opportunities in the market to acquire such a relevant portfolio of assets in the gas transportation sector. Defensive asset with stable regulatory framework Fully operational assets with O&M contracts with Transpetro. No volume or commodity risks. Stable regulatory framework with arms-length ship-or-pay contracts in place with PETROBRAS. Long-term GTAs with circa 13 years¹ of remaining period. Long term authorization period with circa 22 years¹ of remaining period. Strong and predictable cash flows hedged against inflation Ship-or-pay contracts predominantly denominated in BRL² and annually adjusted by local inflation. Consistent high EBITDA margins. High EBITDA conversion into free cash flow given low required opex. High leverage capacity resulting in tax shield benefits. High-quality, recently built assets with low maintenance capex requirements. Leading Latin American infrastructure player Leading position in a key segment in LatAm s most relevant market. ~USD 1.2³ billion of EBITDA in Financial flexibility to tap into the expected future growth of the Brazilian natural gas industry. ~47% of pipeline extension in Brazil and 26% of the total gas transportation capacity. Sector with high barriers to entry. (1): Weighted average by contracted volume (2): ~40% of total contracted volume linked to USD and Brazilian inflation index IGP-M (GTA Gasene) (3): Considering PTAX exchange rate USD/BRL of 3.52 (2016 average) Source: PETROBRAS and Brazilian Central Bank 5

6 Brazilian Natural Gas Sector at a Glance Brazilian natural gas consumption still has a substantial room for growth in the next coming years Total Natural Gas Consumption Annual average mln m³/day 176,4 76,9 90,4 35,8 34,4 46,2 2016E 2021E 2026E Total Expected Demand Max. Demand Brazilian Natural Gas Pipelines Geographic Footprint TAG NTS TBG Legend: TSB Gás Ocidente Solimões Basin Natural gas basins Transportation company Length (000' km) Transportation Capacity (mln m³/day) TAG NTS TBG TSB Gás Ocidente Total Santos Basin Guanabara Bay Recôncavo Basin Espirito Santo Basin Campos Basin Source: Public Information, Ministry of Mines and Energy (MME), National Petroleum, Natural Gas and Biofuel Agency (ANP) and EPE (Plano Decenal de Expansão de Energia 2026) 6

7 Prospective Purchasers Requirements In order to participate in the Process, the prospective purchaser must cumulatively meet the following requirements Requirements by Type of Investor Sufficient financial capability STRATEGIC / INDUSTRIAL INVESTORS Potential investor must have financial capacity to make an investment of at least US$ 500 mln in a single transaction. This investment volume would correspond to a minority stake in an asset with the size of the target asset. Publicly-held investors: In the case of investors with shares listed on the stock market, the minimum investment volume of US$ 500 mln must represent less than 20% of the average market capitalization of the potential investor in the last 12 months. Privately-held investors: In the case of privately-held investors (shares not listed on the stock market), the minimum investment volume of US$ 500 mln must be equivalent to (i) its available cash or cash equivalents as published at its latest financial statement, or (ii) the debt volume that would allow further increase by the potential investor so that its ratio [Gross debt / (Gross debt + Net equity)] won t be over 50%. Presence and expertise in the target asset s activity sector Potential investor must have stake on assets natural gas transport or distribution (gas pipelines) or oil and oil derivatives (oil pipelines) in Brazil and/or abroad with extension superior to 2,000 km, and experience in operation or operation management of this class of assets. Sufficient financial capability FINANCIAL INVESTORS Potential investor must have at least US$ 5 bln assets under management. Investment policy aligned to the asset s characteristics Potential investor must have investments in infrastructure assets. Potential investor must have or may be allowed to perform investments in Brazil and/or in other emerging countries and must prove or declare that it has no restrictions for doing so. 7

8 Prospective Purchasers Requirements (Cont d) In order to participate in the Process, the prospective purchaser must meet the following requirements Other Requirements 1. Neither prospective purchaser nor any of its affiliates can A. be subject to (or be owned or controlled by a person or entity subject to any economic, financial or trade (i) sanctions, (ii) regulations, (iii) embargoes or (iv) restrictive measures ( Sanctioned Person ), and that were administered, enacted, imposed or enforced by the World Bank, the United Nations Security Council, the United States of America, the United Kingdom, the European Union, France, Italy, Austria, the Netherlands, Brazil, and the respective governmental institutions and agencies of any of the foregoing. B. be located, incorporated, organized, or resident in a country subject to any economic, financial or trade (i) sanctions, (ii) regulations, (iii) embargoes or (iv) restrictive measures ( Sanctioned Country ) and that were administered, enacted, imposed or enforced by the World Bank, the United Nations Security Council, the United States of America, the United Kingdom, the European Union, France, Italy, Austria, the Netherlands, Brazil and the respective governmental institutions and agencies of any of the foregoing. C. have any business affiliation or commercial dealings with, or investments in, any Sanctioned Country or Sanctioned Person. 2. In addition, the prospective bidder should not be included in the following restrictive lists: A. Cadastro Nacional de Empresas Inidôneas, Suspensas e Punidas (Available at: and B. Empresas impedidas de transacionar com a PETROBRAS. (Available at: 3. The subsequent fitting of prospective bidder, or any of its affiliates, in the abovementioned situations will result in its elimination from the Potential Transaction process. 4. Furthermore, by participating in this Potential Transaction process, the prospective purchaser shall undertake not to take any action, or omit to take any action that would violate any applicable law related to business ethics, including but not limited to the US Foreign Corrupt Practices Act, Brazilian anti-bribery laws (specially the Brazilian Federal Act n /2013) and the principles described in the Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (hereinafter Anti-Bribery Law ). 5. In order to assume that it meets the requirements above, to participate in the Potential Transaction process and comply with the requirements set forth in item 2 above, prospective purchaser shall sign a Compliance Certificate, in the strict terms of the model to be supplied by PETROBRAS, and must indicate, if applicable, whether it is subject to any kind of sanction, even if it considers that the sanction does not prevent its participation in the Process. In case prospective purchaser is subject to sanctions, it must describe in the Compliance Certificate the nature and details of the sanction, as well as indicate the restrictions arising therefrom. A. The accuracy of this statement and the fulfillment of the requirements above will be verified by PETROBRAS after the assumption of the confidentiality obligations required to participate in this Process. 6. Prospective purchaser qualified to participate in the Process, in compliance with requirements established in this Teaser, will be able to form a consortium with independent(s) party(ies). In this case, the prospective purchaser will be obliged to inform PETROBRAS, at the appropriate point in time, of such condition and be the leader of the consortium. Prospective purchasers that wish to form a consortium will be required, at the appropriate point in time, to formalize the formation of consortium. The party or independent parties will be obliged to sign separate Non-Disclosure Agreement and Compliance Certificate and must, each one of the partners, individually, comply with requirements as prospective purchaser abovementioned in this document. Participation in such parties/consortiums will be subject to admissibility assessment by PETROBRAS, according to criteria established in this Teaser. Once approved by PETROBRAS, the party or independent parties will be able to participate in the Process along with the prospective purchaser, considering that, for all intents and purposes of this Process, the parties will be treated as a single potential purchaser, in the capacity of consortium. 8

9 Important Notice This Opportunity overview (the Teaser ) is being furnished to prospective purchasers and published in PETROBRAS site ( with the purpose to present the Potential Transaction. This document is being provided only with the purpose of verifying the interest of the market in the opportunity and therefore do not oblige PETROBRAS to start or to conclude a process for the sale of its assets. This document may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act) that merely reflect the expectations of PETROBRAS management. Such terms as anticipate, believe, expect, forecast, intend, plan, project, seek, should, along with similar or analogous expressions, are used to identify such forward-looking statements. These predictions evidently involve risks and uncertainties, whether foreseen or not by the PETROBRAS. Therefore, the future results of operations may differ from current expectations, and readers must not base their expectations exclusively on the information presented herein. This document is issued by PETROBRAS in the context of the Potential Transaction. It has been prepared by PETROBRAS and not by any other person and is furnished to the recipient by PETROBRAS solely for its information and should not be relied upon and shall not confer rights or remedies upon, the recipient or any of its employees, creditors, holders of securities or other equity holders or any other person. This Teaser has been assembled for the sole purpose of determining whether the prospective purchasers wish to receive further information for analysis in connection with the Potential Transaction upon undertaking certain confidentiality obligations. Although this document was prepared in good faith and the information provided herein may be obtained from publicly available sources, neither PETROBRAS nor any of its affiliates nor any of its associates, nor subsidiary companies (the PETROBRAS Group ), nor any of their respective directors, officers, employees, representatives, advisers or agents, is making any representations or warranties, expressed or implied, as to the fairness, accuracy, reliability, sufficiency, reasonableness or completeness of such information, statements or opinions contained in, or otherwise in relation to, this document or any written or oral information made available to any interested party, and no liability whatsoever is accepted by any such person in relation to any such information or opinion. Only those representations and warranties which may be made on a definitive agreement concerning the Potential Transaction (which will not contain any representations, warranties or undertakings as to this document) shall have any effect. In particular, any prospective purchaser will, so far as permitted by law, be required to acknowledge in the definitive agreement relating to the Potential Transaction that it has not relied on or been induced to enter into such an agreement by any representation or warranty, save as expressly set out in such agreement. The information contained in this document is being delivered for information purposes only. Any financial information ( Financial Information ) contained in this document regarding any part of the PETROBRAS Group has been obtained from information ( Source Data ) prepared by PETROBRAS management for internal purposes only and not with a view toward disclosure to third parties and may not comply with IFRS, UK, BR or US GAAP. No attempt has been made by PETROBRAS to audit or verify the Source Data or the Financial Information or any other financial information. Furthermore, any information that might be contained in this document regarding TAG is subject to a number of factors and involve a number of risks which cannot be predicted by PETROBRAS Group. This material is necessarily based upon information available to this date and considering market conditions, economic and other conditions in the situation where they are and how these can be evaluated at the moment. 9

10 Important Notice (Cont d) PETROBRAS does not consider that the Financial Information that might be herein contained is or should be taken as a reliable indication of the projected financial performance or any other matter. The Financial Information may include certain forward-looking statements and forecasts including statements with respect to financial conditions and results of operations relating to certain business and cost savings, management s plans and objectives for relevant assets. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be based on certain assumptions with regard to the future evolution of a series of magnitudes and of the economy in general, which may not be fulfilled and, thus, the conclusions reached in this document may be altered accordingly. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved. Actual outcomes are highly likely to vary from any such forward-looking statements or projections and such variations may be material. There are a number of factors that could cause actual results and developments to differ materially from any of those expressed or implied by any such statements and forecasts, such as, but not limited to, the ability to achieve cost savings, exposure to fluctuations in exchange rates for foreign currencies, inflation and adverse economic conditions. Nothing contained in this document is or should be relied upon as a promise or representation as to the future. Except where otherwise expressly indicated, this document speaks as of the date hereof. Neither the delivery of this document nor any purchase of any of the securities, assets, businesses or undertakings of PETROBRAS or any related entity shall, under any circumstances, be construed to indicate or imply that there has been no change in the affairs of the PETROBRAS Group since the date hereof. In addition, no responsibility or liability or duty of care is or will be accepted by the PETROBRAS Group or its respective affiliates, advisers, directors or employees for updating this document (or any additional information), correcting any inaccuracies in it which may become apparent or providing any additional information to any recipient. The information contained in this document is necessarily based on economic, market and other conditions as in effect on, and the information made available as of, the date hereof or as stated herein. It should be understood that subsequent developments may affect such information and that the PETROBRAS Group have no obligation to update or revise such information. This document does not constitute a prospectus or an offer for the sale or purchase of any shares or other securities in, or any underlying assets of, any member of the PETROBRAS Group or otherwise enter into the Potential Transaction, and does not constitute any form of commitment on the part of any member of the PETROBRAS Group or any other person to enter into any transaction or otherwise. Neither this document, nor any other written or oral information made available to any recipient or its advisers will form the basis of any contract or commitment whatsoever. Any proposal regarding a possible transaction between any member of the PETROBRAS Group and the recipient will only give rise to any contractual obligations on the part of such member of the PETROBRAS Group when a definitive agreement has been executed. PETROBRAS reserves the right without liability, to change, to amend or replace this Teaser and the furnished information and to amend, modify, delay, accelerate or terminate the process, negotiations and discussions at any time and in any respect, regarding the Potential Transaction or to terminate negotiations with any prospective purchaser/recipient of this document, provided such is equally informed to all participants and always observing the impartiality and equal treatment. PETROBRAS undertakes no obligation to provide the recipients with access to any additional information. The recipient acknowledges that it will be solely responsible for its own assessment of the market and the market position of any member of the PETROBRAS Group or any of its securities, assets or liabilities or any part thereof and that it will conduct its own analysis and be solely responsible for forming its own view of the value and potential future performance of the same. Nothing contained within this Teaser is, or should be, interpreted as or relied upon as a promise or representation as to future events or undertakings. 9

11 Important Notice (Cont d) Recipients shall keep their relationship with PETROBRAS confidential with regard to the Potential Transaction and shall not disclose to any third party that they have received this document or that they are assessing their interest in the Potential Transaction. In no circumstances will any member of the PETROBRAS Group or any of its advisers be responsible for any costs or expenses incurred in connection with any appraisal or investigation of any member or part of the PETROBRAS Group or for any other costs and expenses incurred by a recipient. Recipients of this document and their representatives should observe any applicable legal requirements in their jurisdiction. Accordingly, the recipient agrees that neither the recipient nor any of its agents or affiliates shall use such information save for the purposes specified in this notice or document and shall not use such information for any other commercial purpose. The distribution of this document in certain jurisdictions may be restricted by law and, accordingly, by accepting this document, recipients represent that they are able to receive it without contravention of any unfulfilled registration requirements or other legal or regulatory restrictions in the jurisdiction in which they reside or conduct business. No liability is accepted to any person in relation to the distribution or possession of the document in or from any jurisdiction. This document does not purport to give legal, tax or financial advice and should not be considered as a recommendation by any member of the PETROBRAS Group or any of their respective representatives, directors, officers, employees, advisers or agents or any other person to enter into any transactions and recipients are recommended to seek their own financial and other advice, and are expected to adopt their own decisions without basing them on this document. As indicated herein, this document is solely to inform and the information herein should not be relied upon and shall not confer rights or remedies upon the recipient or any other person. This document shall not exclude any liability for, or remedy in respect of, fraudulent misrepresentation. By accepting this document, the recipient agrees to be bound by the foregoing limitations. 9